Prison Inmates Collecting Millions in Unemployment Cash

WASHINGTON – Overpayments in the unemployment insurance system cost taxpayers billions of dollars every year, including millions of dollars in benefits going to convicts in prisons across the nation, according to a House panel.

The House Ways and Means Subcommittee on Human Resources held a hearing focusing on ways to “end cash for convicts” and improve the integrity of the unemployment insurance system.

Rep. Dave Reichert (R-Wash.), the subcommittee’s chairman, said reports from several states suggest that millions of dollars have been paid wrongly to individuals who are not able and available for work because they are incarcerated.

“New Jersey, there were 20,000 inmates who collected over $24 million. In Illinois, another $2 million was misspent this way. Millions more were wasted in South Carolina, Tennessee, Texas, and Wisconsin,” Reichert said. “It is an injustice that the tax dollars of law-abiding citizens are paying for these benefit checks for people who have broken the law and simply should not qualify for these benefits.”

Reichert, a former sheriff, introduced a bill in July that aims to block states from paying unemployment benefits to prisoners. The Permanently Ending Receipt by Prisoners (PERP) Act would also instruct states to use currently available prison data to make sure they are not paying benefits to inmates.

Reichert said some improper payments are being made to prisoners because in many states, the inmates themselves are expected to report their new residence in prison, which would stop the payments. Not surprisingly, said Reichert, few inmates volunteer to stop collecting these checks.

The UI program’s emphasis on expediting delivery of the checks before verifying that they are going to the right person has been one of the main problems driving this issue. Better use of data systems could prevent these sorts of improper payments from being made, Reichert said.

Pennsylvania’s secretary of labor, Julia Hearthway, said her state has stopped more than 4,000 unemployment compensation claims during the year’s first quarter by using a checking system designed to stop inmates in county and state prisons from receiving unemployment benefits.

Hearthway explained that when a new inmate enters a prison, the system automatically compares the person’s information with unemployment compensation rolls maintained by the state’s Department of Labor. If a match is found and verified, the individual is removed from active unemployment compensation benefits status.

The system is projected to bring savings of more than $100 million this year. The Pennsylvania Department of Labor bases its savings estimates by calculating the average duration of an unemployment compensation claim and average weekly benefit with the number of stopped claims.

The department is also cracking down on unemployment compensation fraud by using software to block claims using foreign Internet Protocol addresses and foreign area codes, said Hearthway. Nearly 4,000 foreign IP addresses were blocked during the first six months of this year.

Hearthway said Pennsylvania has two provisions that prevent people from collecting benefits while incarcerated. One is the broader federal requirement that a person must be ready and available to work, and the other is the state’s explicit ban on incarcerated individuals from enrolling in the benefits program.

The benefit payments to convicts are only one small aspect of the broader issue of improper UI payments.

“The total cost of abuse in this system that can go to those folks that really need it is $58 billion,” Reichert said. “That’s the total amount of UI improper payments over the last five years.”